Wednesday, June 15, 2005

Confessions of a Euro-skeptic

There is certainly plenty of Euro-gloom around these days. But I continue to be among those that see far more of opportunities than of problems in the present situation.

I was surprised to see that there are some card-carrying Euro-skeptics that seems to share this view. The chief economist of Morgan Stanley Stephen Roach proudly proclaims himself to be in this category.

But in a report the last few days, his tone is a somewhat different one

His assessment is that the – at least temporary – demise of the Constitutional Treaty now gives Europe the time to “focus its energies on the sad state of its economy. That gives Europe a much cleaner shot at the heavy lifting of structural change and productivity enhancement.”

When looking at Europe, he notes what’s happening on the corporate level:

“I suspect that too much is being made of the success or failure of Europe’s government-sponsored reform initiatives. The US experience tells us that private-sector corporate restructuring is the main agent of change. This has also been the case in Japan in recent years, and is now the case in Germany, especially in Japan.”

And this is what is now gathering speed throughout the European economies. And in much the same way as I have been doing in speeches and articles he points at the restructuring underway on the corporate level in the German economy. That, he says, might well be the key to what’s happening in Europe at the moment.

Present figures for the European economy are problematic. But that’s not the point, he says.

“The real case for Europe lies beyond the business cycle. It is first, and foremost, a productivity story – one driven by the potentially powerful combination of IT-enabled capital deepening and improved labor market flexibility. Our research analysts corroborate a broad-based pick-up of IT spending by Corporate Europe – a belated catch-up to the late-1990’s trend that swept through Corporate America.”

And on all of these issues the present convulsions of the Constitutional Treaty don’t make much of a difference. It’s the combination of the single currency and the single market that makes the difference in forcing an acceleration of corporate restructuring. To which should be added, in my view, the effects of enlargement and globalisation in general.

“From the standpoint of economic performance, a single currency, a uniform interest rate, and the pan-regional harmonization of taxes, pricing, and regulatory conventions count for a good deal more than agreement on constitution rights.”

Those are the words of a professed Euro-skeptic from the other side of the Atlantic. He sees opportunities, change and improvement in Europe of today.